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Home > Insurance Division > Managed Care > Organized Delivery Systems > Regulatory Requirements

Organized Delivery System (ODS) Regulatory Requirements

Whether an ODS must become certified or licensed depends upon whether the ODS assumes financial risk from the carrier. An ODS that assumes financial risk must become licensed, unless the Department determines the financial risk is de minimus, as set forth in regulation. An ODS that does not assume financial risk or that is determined to assume only a de minimus financial risk must become certified.

Whether an ODS must become licensed or certified, it must meet certain minimum standards regarding the functions that the ODS is or intends to perform under contract with carriers. The standards are substantially similar to those that carriers would have to comply with if they were performing the specific functions themselves in accordance with the Health Care Quality Act, P.L. 1997, c.192 (as codifed, generally: N.J.S.A. 26:2S-1 et seq.). This is because the Organized Delivery System Act states at N.J.S.A. 17:48H-33 that both licensed and certified ODSs are subject to the Health Care Quality Act.

The Health Care Quality Act and rules govern certain operations of carriers that offer health benefits plans with utilization management components and/or on a managed care basis. The Department has established nine broad categories of activities representing functions governed by the Health Care Quality Act that are often delegated by carriers.

These functions are:

1. Performing or arranging for the performance of one or more types of health care services;

2. Network management, including recruitment and retention;

3. Credentialing and recredentialing;

4. Utilization management development;

5. Utilization management application;

6. Utilization management appeals;

7. Member complaints;

8. Provider complaints;

9. Continuous quality improvement.
Although a carrier remains responsible to assure compliance with the standards set forth for these functions even if the carrier delegates the activity, when the delegate is an ODS, the ODS also becomes legally responsible to assure compliance with the Health Care Quality Act and appropriate rules.
There is a base fee of $1,000 required for filing an application to become a certified ODS. Applicants seeking licensing must pay a base filing fee of $2,500. Whether seeking licensing or certification, the ODS must pay additional fees for each additional function that the applicant wishes to perform on a delegated basis. However, the total fee will not exceed $5,000 per applicant. The application packages and instructions are available online, or may be obtained by contacting the appropriate Department staff. Contracts between the ODS and health care providers (provider agreements), and contracts between the ODS and carriers are subject to Department review.

ODSs that receive certification must apply to renew their certification every three years. Certified ODSs may modify their certification in the interim, but must apply for approval. Applications for renewal and for some types of modifications require payment of a fee. ODSs that become licensed do not have to renew or modify their license over time, but are subject to ongoing financial monitoring.

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New Jersey Department of Banking and Insurance